Singapore Government Press Release

Media Division, Ministry of Information and The Arts

36th Storey, PSA Building, 460 Alexandra Road, Singapore 119963.

Tel: 3757794/5

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May I first congratulate CPF Board on the opening of the CPF Bishan Branch Building. This Branch office has been set up to better serve CPF members in the northern districts. It will complement the Board’s existing network of Branch offices in the west in Jurong, Tampines in the east and the Main office in the CBD.

The CPF Board has served Singaporeans for the past 43 years by helping all employees to save for their retirement, as well as homeownership and health-care. Today, as we face the impact of the regional currency turmoil and economic crises, we can better appreciate the benefits of saving for the unexpected. In 1985, when we last experienced an economic downturn, the reduction in CPF contribution rate was very effective in helping to overcome the loss of cost competitiveness. While the current crisis is of a larger scale and could have more serious impact, we are not yet at the stage of having to reduce CPF contribution rates. I would like to reassure CPF members that we are not planning to reduce the employers’ contribution rates.

In Jan 1997, we merged the Basic and Enhanced CPF Investment Schemes. The purpose was to allow more members to have access to a wider range of investment options. For instance, it used to be that only members who qualify for the EIS could purchase insurance policies with CPF savings, or place CPF savings in fixed deposits to earn higher interest. With the merging of the two schemes, all CPF members with savings in excess of the Minimum Sum have access to the same range of investment options. However, I would like to remind CPF members that a more liberal investment scheme is not a licence to use CPF savings for stock market speculations.

We must always remember that CPF savings are meant for old age and retirement needs. Investments should be made prudently and selectively so as to enhance assets for old age. Speculative and short-term forays into the stock market by individual CPF members have often resulted in losses rather than gains for these members. Hence, from Oct 1996 to Sept 1997, while 83% of total CPFIS participants or about 346,000 CPF members made profits from their investments, vast majority, 310,000 or 90% made less than the CPF interest they would have earned by keeping their savings with CPF Board. In other words, they would have been better off leaving their savings in their CPF accounts.

Of course, it is true that the depressed stock market had a lot to do with this result. But I would also like to point out that the preference of CPF members to invest on stocks and shares on their own is another reason for the poor performance. This tendency for individuals to buy shares on their own leaves them exposed to the volatility of the stock market. Unlike professional fund managers and unit trust managers who deploy large funds in risk-adjusted portfolios, CPF members are not able to build up diversified and more secure long-term investment portfolios. If CPF members are to have better success in enhancing their savings, they have to learn to make better use of professional fund management services. This is why we are refining and revising the CPF Investment Scheme. We hope to provide CPF members with more options to invest with professional fund managers and unit trusts. We will also introduce more transparency by requiring fund managers to make regular disclosure of their investment performance. This will provide CPF members with more timely guidance on the choice of fund managers. The review is almost completed and we will be able to announce the details very soon.

However, I feel obliged to reiterate that ultimately, the CPF member must exercise prudence and caution in his choice of investments. What we can do is to remove unnecessary hindrance. We cannot guarantee profits. Even with the best effort, some fund managers may loose money from time to time. Each CPF member must make his own choice and be fully responsible for the final results, whether it is a profit or loss.

As not all CPF members will be able to participate in the CPF Investment Scheme, we have also tried to help those with inadequate savings for such investment to earn a higher return. That is why, Government had introduced a higher additional interest for savings in the CPF Special Account and Retirement Account. As announced by the Minister for Finance in March, with effect from 1 July 1998, Government will pay 1.5% additional interest rate for savings in the Special Account and Retirement Account. This 1.5% additional interest is on top of the normal interest rate for savings in the ordinary account. This enhancement will be of special significance to lower-income CPF members who cannot participate in share investments. We are also allowing members to transfer surplus savings from their ordinary accounts to top up the special accounts to $40,000 and earn higher interest. This will help them to build up more savings for retirement and old age.

The CPF is thus an evolving mechanism to safeguard and enhance Singaporeans’ savings for old age. It has played a crucial part in our social security and contributed to our economic competitiveness. We will continue to refine and add value to the CPF so as to provide better old age protection for our members.

Finally, may I once again congratulate the CPF Board on the opening of the Bishan office. I hope that this new office will enable the Board to provide better services to its members in the surrounding areas. It is now my pleasure to declare the CPF Bishan office open.

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